Electricity Price Review

The Government has responded to the recommendations proposed in the Electricity Price Review (EPR). MBIE is progressing a number of work streams to deliver on the response. Other agencies, particularly the Electricity Authority, also have a key role.

Progress was impacted by COVID-19 and associated resource constraints but all work streams are now under way. This page sets out progress.

The EPR dashboard

The dashboard below outlines progress towards key work streams led by the Ministry of Business, Innovation and Employment. The Electricity Authority is leading a number of other work streams.

Implementing the Electricity Price Review: Dashboard [PDF, 439 KB]

MBIE work streams

Strengthening the consumer voice

Establish the consumer advocacy council

Progress diagram regarding the establishment of the Consumer Council

EPR found that smaller consumers struggle to make their voice heard and influence the electricity sector. The obstacles include the sector’s complexity, consumers’ lack of resources, and cultural differences and language barriers.

Government has agreed to establish the Consumer Advocacy Council to be the trusted, credible, authoritative and independent advocate for residential and small business electricity consumers. Its role will be to advocate on behalf of these consumers by providing evidenced-based advocacy on policy and regulatory consultations, and in decision-making processes. Funding was announced in August 2020 as part of a $17 million budget package for consumer advocacy and energy hardship.

A recruitment process is expected to commence in October 2020. The intention is to appoint the Chair, followed by the recruitment of the Council members. All appointments will be subject to approval of the relevant Ministers and the usual appointments process. The Council’s Terms of Reference is also subject to government approval.  A Secretariat to support the Council will also be established.

Electricity Price Review – recommendation A1 [PDF, 854KB](external link)

Reducing energy hardship

Establish a cross-sector energy hardship group

Diagram of the progress of establishing cross-sector energy hardship group

The causes of energy hardship extend beyond the electricity sector, and the solutions require joint action. Government has agreed to establish a cross-sector energy hardship group bringing together industry, NGOs and government agencies. Funding was announced in August 2020 as part of a $17 million budget package for consumer advocacy and energy hardship.

Work continues on drafting the terms of reference, membership and establishment process. The Minister of Energy and Resources (in consultation with the Ministers for Housing, Social Development, Commerce and Consumer Affairs and Child Poverty Reduction) will determine the final make-up of the group and its terms of reference. Establishment of the group is targeted for early in the new parliamentary term.

Electricity Price Review – recommendation B1 [PDF, 854KB](external link)

Define energy hardship

Diagram showing the progress of defining energy hardship - current phase: agreeing definition

MBIE is working to develop an agreed definition of energy hardship, and associated indicators, to assist with measuring and tracking energy hardship over time. This will also assist with identifying those in energy hardship and assessing the effectiveness of initiatives to address energy hardship. MBIE is targeting release of a discussion document early in the new parliamentary term.

Work continues on developing the definition and investigating measures of energy hardship to assist with assessing and tracking energy hardship levels.  To support this initiative and future analysis, MBIE is working with the Electricity Authority, the Electricity Retailers’ Association of New Zealand, electricity retailers and Stats NZ to make arrangements for key electricity usage data to be included in the Integrated Data Infrastructure (IDI). The IDI is a large research database holding anonymised microdata about people and households in NZ.

Electricity Price Review – recommendation B2 [PDF, 854KB](external link)

Build a network of community level support services

Diagram showing the progress of establishing community level support services pilot programmes

This initiative aims to progressively link and expand existing support services to establish a nationwide network of organisations offering credible, independent, electricity-specific advice and support services to those in energy hardship. A separate fund, sitting alongside this network, will be established to assist households in energy hardship become more energy efficient.

Preliminary work is underway to design the approach to building a network of support services and the fund. An important input is a high-level stocktake of existing support services. MBIE is liaising with other agencies, industry, community groups and support services.

The $17 million consumer advocacy and energy hardship budget package announced in August 2020 includes funding for pilot programmes aimed at progressing this initiative. Other relevant budget announcements include a $28 million fund to trial renewable energy technology for public and Māori housing to test new and innovative ways to make energy affordable for people, and Government support for a project to upgrade and warm up homes for low income and vulnerable residents in Dunedin and Otago.

Electricity Price Review – recommendation B3 and B4 [PDF, 854KB](external link)

Prohibit prompt payment discounts

Diagram showing the progress of prohibiting prompt payment discounts - current phase: evaluating need for action

The EPR found that prompt payment discounts (PPDs) are excessively high and not cost reflective. They cause additional hardship for those that can least afford it, and they contribute to customer confusion when comparing prices.

The Minister of Energy and Resources wrote an open letter in November 2019 to retailers setting out concerns with PPDs and the intention to revisit the EPR recommendation to prohibit them in six months. A follow up letter was sent to retailers in July 2020 asking for information as input to revisiting this. The Electricity Authority has initiated monitoring to collect and analyse data from retailers on early payment discounts and late payment penalties. This analysis will inform the Ministry’s consideration of appropriate next steps to address the EPR findings and recommendations. Advice will be provided to the incoming Minister. The Minister has previously made it clear that regulation to address the EPR’s findings on PPDs remains an option.

Electricity Price Review – recommendation B7 [PDF, 854KB](external link)

Arrangements for vulnerable and medically dependent consumers

EPR recommended establishing mandatory minimum standards that distributors, retailers and others must meet when providing electricity or related services to vulnerable and medically dependent consumers. The Electricity Authority should monitor and enforce the standards.

The Electricity Authority is reviewing existing voluntary arrangements for vulnerable and medically dependent consumers. That review now forms the first phase of progressing this EPR recommendation, and MBIE officials are liaising closely with the Electricity Authority throughout this first phase.

Subsequent phases will depend on the outcome of the first phase, and on progress with related EPR activities, particularly the passage of the Electricity Industry Amendment Bill which would clarify the Electricity Authority’s ability to enforce consumer protection measures such as mandatory minimum standards.

Electricity Price Review – recommendation B6 [PDF, 854KB](external link)

Improving transmission and distribution

Issue a GPS for transmission and distribution pricing

Diagram on the progress of issuing a GPS on transmission and distribution pricing - currently evaluating need for action

EPR recommended Government should issue a government policy statement (GPS) to the Electricity Authority that should shape its preparation of new guidelines for setting transmission prices. Consideration of a possible GPS is paused while the Electricity Authority progresses its Transmission Pricing Methodology (TPM) work programme. MBIE is monitoring TPM progress and evaluating whether there is need to issue a GPS.

EPR also recommended Government should issue a GPS to the Electricity Authority to guide it through its reforms to distribution pricing. MBIE is evaluating the need for action.

Electricity Price Review – recommendation E1 and E2 [PDF, 854KB](external link)

New powers for the Commerce Commission to regulate distributors

Diagram showing the progress of new powers for the Commerce Commission to regulate distributors - evaluating need for action.

The EPR considered that the Commerce Commission lacks sufficient powers to address certain future issues identified in the regulation of distributors. The EPR’s recommendation does not address any significant or pressing problems but is aimed at making the regime more flexible for the future – providing such flexibility needs to be balanced against the certainty that Part 4 of the Commerce Act provides.

The Ministry is assessing the EPR’s recommendation and developing the policy rationale, alongside alternatives, as part of a more significant consideration of economic regulation in the future. We will report back to Ministers once the background policy work has been undertaken.

Electricity Price Review – recommendation E4 [PDF, 854KB](external link)

Improving the regulatory system

Amend the Electricity Industry Act

Diagram showing the progress of amending the Electricity Industry Act - current phase: drafting the bill

Government has agreed to progress amendments to the Electricity Industry Amendment Act 2010 to address areas identified for improvement in response to EPR findings and recommendations.

These include:

  • provisions relating to Consumer Advocacy Council (power to appoint and recover costs from industry participants)
  • giving the Electricity Authority a specific consumer protection function
  • giving the Electricity Authority clearer powers to regulate network access agreements
  • giving the Electricity Authority more flexible powers to regulate distributors’ involvement in contestable electricity markets
  • clarifying the Electricity Authority’s information gathering powers
  • providing a regulatory backstop to ensure timely action by industry and the Electricity Authority on matters relating to specific EPR recommendations improving the wholesale and retail markets

The full details are set out in the following documents:

December 2019 Cabinet paper [PDF, 1.7 MB]

Regulatory Impact Analysis [PDF, 4.2 MB]

MBIE is working with the Parliamentary Council Office to draft the Bill. It is expected that the Bill will be ready for introduction into the House early in the new parliamentary term.

Electricity Price Review – recommendation F1, F2, F3 and A1 [PDF, 854KB](external link)

Phase out low fixed charge tariff regulations

Diagram showing the progress of phasing out low fixed-charge tariff regulations - current page: developing phase out approach

The EPR found that the Low Fix Charge (LFC) regulations are poorly targeted and result in a number of unintended consequences. EPR recommended the regulations should be phased out because they worsen energy hardship for some households and promote inefficient choices for new technologies, such as rooftop solar and electric vehicles. They also increase pricing complexity and confusion, making it harder for consumers to shop around for the right electricity plan.

Government acknowledges the EPR’s findings on LFCs, but is mindful of the impacts the transition may have. MBIE will engage with industry and consumer groups to better understand the likely impacts, and to design a phase-out mechanism that balances ensuring a just transition with taking meaningful steps to reduce the harm the regulations create.  It is expected that we will be ready for the Government to make decisions early in the new parliamentary term.

Electricity Price Review – recommendation F4 [PDF, 854KB](external link)

Preparing for a low-carbon future

Explore new institutional arrangements for energy policy and regulation

Diagram showing the progress of exploring new institutional arrangements for energy policy and regulation - current phase: developing agreed low-impact improvements

EPR recommended Government explore new institutional arrangements in the energy sector. This reflects the importance of fit for purpose energy institutions in facilitating the transition to a low-carbon economy. EPR did not identify any major concerns with the existing arrangements.

MBIE is undertaking a phased approach to this review. The initial phase is identifying changes that can be made which are low impact in terms of investor confidence and the current energy work programme, yet would be of net benefit to the energy sector if implemented.

Improving co-ordination between regulatory agencies is a particular focus. The Ministry is engaging with the Electricity Authority, Gas Industry Company, Commerce Commission and Energy Efficiency and Conservation Authority to explore ways to improve coordination.

Electricity Price Review – recommendation G3 [PDF, 854KB](external link)

Improve building energy efficiency

EPR recommended that Government review and amend building performance regulations and programmes to improve the energy efficiency of new and existing buildings.

The Building for Climate Change programme is on track to deliver the Building and Construction sector component of the Emissions Reduction Plan. Ministers formally launched the programme on 3 July with a statement of intent setting out the strategic direction.  The programme is consulting with the Sector and the public on core components of the Sector’s part of the Emissions Reduction Plan.

Building a more sustainable construction sector - Beehive media release(external link)

Background: Why the review was conducted

In April 2018, the Minister of Energy and Resources commissioned an independent review into New Zealand’s electricity market. This was because electricity prices, especially for residential consumers, increased faster than inflation for many years, putting pressure on household budgets. In comparison, prices faced by commercial and industrial customers remained relatively flat.

Such reviews are not new. Since the 1970s, New Zealand has reviewed its electricity sector roughly every decade – each time substantial changes have been made to improve or correct the sector’s performance. In the 1980s and 1990s, the sector was privatised to improve commercial performance, and a light-handed regulatory regime was developed. By the 2000s, concerns about industry performance and self-governance arrangements resulted in further improvements being made, including developing new regulations and improving market competition to restrain retail prices to efficient levels.

However, the 2018-19 review was unique as it addressed the need for electricity prices to be fair and affordable, not just efficient or competitive. Another novel element was the review’s focus on the consumers’ point of view and their say in the direction of the sector.

This review also considered how to future-proof the sector and its governance structures to help ensure the electricity sector functions well during New Zealand’s transition away from carbon-based fuels – a consideration that will become increasingly important as electricity meets more of New Zealand’s energy needs, and as new technologies are adopted.

As energy production and consumption is such an integral part to New Zealand’s economy, this review was of great interest to the industry and the public.

Further background

Contact us

For general enquiries email us at energymarkets@mbie.govt.nz

Last updated: 21 October 2020